It
was a week of choppy action for the markets as it dealt with a slew of good
and bad reports - with the market focusing mostly on the bad. The largest mover
this week was Friday's unemployment report that reported only 57,000 jobs were
created in November as opposed to the 150,000 expected. One might think that
job creation of any sort would satisfy the street, after going through a year
of negative figures - but the uber-bulls didn't like the sound of sub par growth.

This has generally been the theme with the markets recently. Reports and earnings
are coming in positive, yet just aren't impressing anybody anymore. Intel caused
a ruckus in the NASDAQ this week when it didn't guide it's earnings as high
as the drooling analysts wanted it to. Like an apathetic teenager, nothing
seems to interest the market into rising anymore. Granted we did make new highs
this week, but this market might as well be moving sideways at the pace it's
been going.

To me this is classically reminiscent of a top - with analysts holding hands
singing "NASDAQ 10,000" once again since the market is once again predictable
- consumers rushing into Vanguard High-PE Investments again with full tilt
margin- all the while the market barely manages to maintain it's current rate
of accent. Who are these stubborn bears doubting these reasonable valuations
with their <scoff> market history.

Yes, life as a "it's not over" bear makes me the minority opinion on campus
- and to some new "it's so easy" day traders that have risen from the dead
recently, I'm also the oldest. I guess at 21 I'm just not "with it" anymore.
However, I'm not the only investor who's been looking at this market leery
eyed. From earnings, sentiment, dollar troubles, debt levels, to past bear
markets, something about this rally just doesn't smell like another bull market.
Bull markets tend not to have mass public participation from the very beginning.
Trying to fit this current rally into the shoes of old bull market terminology,
analysts have pulled out the "wall of worry" card despite record high levels.
Thinking of the current sentiment as a "wall of worry" is like a obese kid
looking at the 5 steps up to the dining hall as a journey - it's all in how
you look at it.

I know I promised an extensive report on the social security system last week,
but with finals preparation, events, and work bearing down on students everywhere,
I'm going to have to roll that topic over to next weeks issue.

On with the technicals!

2. The Current Technical Outlook -

2.a. Short term Perspective

The NDX attempted to stretch itself up to new highs but failed to do so at
weeks end, falling back below both trend lines as money flow and divergence
continues to disappoint. An important piece of divergence to note, and something
that the bears have been looking for throughout this rally, is that the NASDAQ
100, and the Semiconductor sector lagged the market, and underperformed in
a big way Friday, joined late in the week by the 'glorified' small cap index.
These are all sectors that usually lead that market, leading us to the conclusion
that we could be in for some down to sideways action. Lets see what the short
term indicators tell us.

Last Weeks Forecast :I expect slight to moderate upside in the
early part of next week with the possibility of a trend line break to the
downside. Any decline back below 1925 would be quite bearish just as a rise
above 1980 would be quite bullish.

Well, this weeks market action was as vague as my forecast. We got the moderate
upside I expected as well as the late week divergence that triggered the decline.
So far so good - with 1925 still being the trigger point. We are forming a
pretty bullish wedge on the short term however that could spark a sharp rally
if we don't break it to the downside (along with bullish divergence on the
RSI.)

Next Week : My expectation depends on how the market resolves itself out of
this wedge. If we manage to break down below 1925 early in the week, we could
decline pretty quickly. If we rally out of the wedge, I would look for new
highs as long as the action is quick and decisive.

Charts of Interest

Whoa! It was a huge day Friday as traders scooped up Bonds like Christmas
presents after the unemployment report caused traders to scramble for cover.
I'm not really going to call a direction on this one yet although I expect
yields to rise of the longer term.

2.b. Long term Perspective

Divergence and a slowing rate of accent all points to the inevitable correction.
How tough that correction will be is the bigger question. The mid-trendline
of the Andrew's pitchfork will play a crucial support role - as will the 200-day
moving average

2.c. Gold and Silver

Amazingly
enough gold has managed to hold on to the 400 level breaking (or at least peeking)
out of the rising wedge in a bullish manner. What is interesting is that, like
most good bull markets, we are beginning to see the signs of an exponential
accent. This is something technicians have historically always had a hard time
managing, calling tops way to early in trends. The way I recommend trading
exponential markets is using moving averages. For instance, we should only
rarely fall below 50 the 50 day moving average, and hardly ever fall below
the 200 day without rebounding quickly. Moreover, it should maintain it's exponential
form. Therefore, now that we reached 400, I'm not going to call a top to this
anymore, since the dollar is more than confirming the move. Could gold correct
sharply? I more than expect it will from time to time - just like every good
bull market should. The key is just to watch the fundamentals and figure out
what you believe in this market - and trade accordingly.

There she falls! Yes the greenback had another disappointing week,
falling against almost every major currency. This SHOULD strike people as odd,
since the supposed "bull market" should be attracting a lot of investment capital.
However, figures actually show a small exodus of foreign investment out of
the U.S. market. Is it a start of a trend or just a blip? Anyways, I think
the dollar will have a good rally eventually but am not going to try and call
it out of a hat until I see something bullish (such as a sharp increase for
a change.)

3. Sentiment Indicators

3.a. Volatility Studies

Volatility remains as docile as a lamb to the woe of options salesmen. Nothing
interesting here...

3.b. Put / Call Ratio

Nothing real interesting occurred in the Put/Call ratio this week - hanging
out between the bands most of the week.

3.c. Summation Ratios and other Oscillators

This index continues it's fairly useless meandering - jumping around it's
average with a slight downtrend for over 8 months now.

3.d. Commitment of Traders

Things remained pretty steady over the week although the large investors in
the NASDAQ got spooked out of their positions and eased up on their shorts
this week.

Yes the market has been confusing and perplexing to all those who have studied
an ounce of market history. It is as if the market has done everything the
bulls have expected, with a Christmas rally on everyone's list this year. I
wonder if the American over-indulgence with credit cards will be considered "naughty
or nice." Anyways, it's tough to hold on to bearish views with the market making
new highs every other week. However, such is the life of the contrarian, and
market history has always rewarded those who respect it. One has to remember
that timing is everything, and that you can't just throw everything short the
market because you believe you are right. As we stated last week, the market
can stay irrational much longer than you can remain solvent. Moreover, there
is nothing wrong with trading the long side of the market despite bearish leanings
which has been seen as a taboo amongst a lot of bears. It's just a matter of
using stops and trend lines intelligently, and then reversing short once the
expected "correction" occurs.

Just like it took a contrarian to buy gold down at 250$, it takes a true contrarian
to see the bearish side of this market. It is also important for that contrarian
to trade his views intelligently, since there is a fine line between being
a contrarian and being just plain stubborn.

Just because you're a lonely bear, doesn't mean you'll be a poor lonely bear.
We just like to be fashionably early to every investment party.

Disclaimer: It has been said that "those who don't
know say, and those who know don't say." These reports are for intellectual
purposes only. If you actually trade them, please do so because you personally
came to the conclusion that it really is a good idea. All facts and charts
are posted as accurate to the best of my knowledge, but no guarantee is given.
Bottom line : Do your own research, and come to your own conclusions. This
is just a pamphlet of ideas written with bad grammar - so use with care.